Time to Roll the Dice

After gapping lower on the open, equities spent the session grinding higher as the earnings season kicked off without any disasters. While the SPX bettered both yesterday's high and low, the index remains mired in a trading range, seeking resolution. The Nasdaq 100, however, has been on a tear. The NDX tacked on one percent today and is nearly 2% off yesterday's lows. It seems traders may be gambling on positive news out of tech companies over the next few weeks, and it's a bet I'm willing to take against them. I intend to rebuild shorts in Intel, Lam Research, Yahoo, and several others ahead of earnings calls. In fact, the late-day ramp in the NDX felt very much like a short squeeze, so my work may begin tomorrow.

Precious metals reversed early gains to close lower, dragging miners down another percent with them. Despite the recent discount in prices, I have been quite reticent to add to my metals positions, primarily due to the action in energy. Commodities bull markets are historically centered around oil, and the recent failure of oil's bull market trend line, along with its continued weakness, does not bode well for commodities in general. At some point, I expect monetary metals to stand on their own legs and swing higher. However, such gains will probably have to wait for more ubiquitous recognition of the fact that the Fed will chase the coming recession with sharp rate cuts.

Perhaps earnings season will open people's eyes to the fact that manufacturers in every corner of the world are suffering from inventory gluts and that consumer spending is slowing rapidly, but we bears cannot afford to underestimate people's abilities to deceive themselves. The psychology around the housing market is a prime example. We have bottom-callers crawling out of every financial media outfit. At the same time, homebuilders are taking massive write-offs on land options and saying there is no recovery in site. Who do you think is right?